5 HR Rules Every New Small Business Must Know

Congratulations! You’ve taken the leap into small business ownership, started growing, and now you’re ready to scale your team. At ProService, we understand that coordinating the administrative details of your business is no easy task, especially when it comes to Human Resources. To get you started, we’ve outlined the five “musts” of HR that every small business in Hawaii needs to know.

The Small Business Bare Minimum

Having your legal documents in order is essential to staying compliant with the law. While there are coverages every small business must have, certain industries require additional insurance. The mandatory coverages you’ll need to provide are:

Hawaii Prepaid Health Care Act (PHCA): A law which requires employers to offer coverage to employees working at least 20 hours per week.

Workers Compensation: Required by law for all companies with one or more employees, Workers Coensation (WC) insurance provides medical coverage and income replacement for workers who become injured or ill on the job.

State-Mandated Short-Term Disability Insurance (TDI or SDI): This law requires employers to pay employees who are temporarily unable to work part of their wages while they are out. Licensing and permit requirements are constantly changing and updates to these laws aren’t easy to find. Having a trusted advisor by your side throughout the process will be critical on matters of legal protection.

Hire Right, Fire Right

In matters of hiring and firing, it’s best to adopt an attitude of “professional correctness”; keep EVERYTHING professionally relevant. The Equal Employee Opportunity Commission (EEOC) and Hawaii Fair Employment Practice Law protect employees from discrimination. So any question that discriminates or appears to discriminate based on race, religion, sex or national origin can create serious trouble. While you’ll want to find a candidate who is a good culture fit as well, many hiring managers find that there are potential issues asking “culture based” questions. When writing 'culture fit' questions, double check to make sure they are job-related.

How do you define 'job related'? As ProService Hawaii’s Senior HR Trainer, Donna Jones advises, “Even questions such as, ‘tell me about yourself?’ can potentially be considered irrelevant or too personal. Instead, ask; ‘tell me about yourself at work?’ or, if you wanted to learn more about a candidate’s core values, you could ask, ‘tell me about a time you saw an employee do something dishonest. What was your reaction?’ or ‘tell me about a time you disagreed with your supervisor. How did you handle it?’ The key here is to keep your questions professionally relevant.”

During the firing process, having your policy guide (handbook) handy will allow you to clearly document misbehavior and address it on a completely professional level. Confronting an employee’s misconduct as a violation of policy - rather than something personal - is critical. However, having an HR advisor to guide you through this process may help you mitigate potentially capricious situations

According to Donna Jones, “One of the most common questions asked is ‘how do I tell this employee I’m letting them go?’” It’s imperative to understand that your actions in this situation carry the weight of a person’s living and you company’s reputation. When in doubt, contact an HR professional to guide you in the right direction.

Compliance is Key

To maintain compliant, your company needs a clear understanding of your state’s laws and a plan to address issues when you realize you are out of alignment with the law. “Maintaining compliant simply means your company’s actions are in alignment with what the law states and intends.” -Donna Jones, Senior HR Trainer, ProService Hawaii. Some laws, such as the Fair Labor Standard Laws (which regulate minimum wage requirements) are easier to implement in the workplace through simply revising wages. However, there are other laws that have less clear application when it comes to understanding what the law “intends.”

For example, under OSHA (Occupational Safety & Health Administration) it’s a business’ lawful responsibility to maintain a safe working environment. However, with so many variables, determine what the law defines as “safe” can often propose a challenge.

Take for instance an employee leaving a ladder out in the middle of a hallway. One manager may consider this a non-safety-issue while another sees an OSHA violation. What the law “intends” is that a company would do whatever it takes to keep the environment ‘safe’ but day-to-day operations present many “gray areas” without clear solutions.

Curate Company Culture

One of the most overlooked details of building a team is the creation of an employee handbook - yet nothing influences a company’s culture more than the standards established and enforced therein.

It’s true that many HR services will have a general handbook for you to download and pass out. But taking the extra step to define exactly what “on time” is and a clear procedure for “how to call out sick” will not only be helpful to your employees but will shape the culture of your company.

Power Up Your Payroll

One of the biggest financial issues companies run into is misclassifying their employees. As state-level data shows,10% to 20% of employers misclassify at least one employee. Knowing how to classify employees correctly and pay them properly can save you a great deal of administrative cost and potential fines.

Take Walmart for example; they had to absorb tremendous financial penalties ($4.83 million) after incorrectly classifying management-level employees while failing to pay overtime compensation correctly. This may have been an honest mistake but it could happen to anyone - just don’t let it happen to you.

As you can see, HR compliance is a complex web of details and check-lists. Any single point unchecked can mean serious consequences. In the words of Donna Jones, ProService’s Senior HR Trainer; “When you encounter a situation you’ve never been in, a trusted resource is invaluable.”

When establishing your HR policies and procedures, a Professional Employer Organization (PEO) can protect you from litigation, keep your employees happy, and empower you to focus on running your small business.

About the Author

Samantha is a Human Resource researcher and writer residing in Honolulu, HI. As a small business owner herself, she understands the challenges of HR management and strives to empower businesses to excel in a modern marketplace.